Friday, November 14, 2014

the 85 richest people in the world control as much wealth as the poorest 3.5 billion...,

imf |  Good morning. What a great privilege to be here among such illustrious guests to discuss such an important topic.

Let me thank Lady Lynn de Rothschild and the Inclusive Capitalism Initiative for convening today’s event. I would also like to recognize the great civic leaders here today—His Royal Highness, the Prince of Wales; President Clinton, and Fiona Woolf, Lord Mayor of the City of London.
We are all here to discuss “inclusive capitalism”—which must be Lynn’s idea! But what does it mean? As I struggled with the answer to that, I turned to etymology and to history.

Capitalism originates from the Latin “caput”, cattle heads, and refers to possessions. Capital is used in the 12th century and designates the use of funds. The term “capitalism” is only used for the first time in 1854 by an Englishman, the novelist William Thackeray—and he simply meant private ownership of money.

The consecration of capitalism comes during the 19th century. With the industrial revolution came Karl Marx who focused on the appropriation of the means of production—and who predicted that capitalism, in its excesses, carried the seeds of its own destruction, the accumulation of capital in the hands of a few, mostly focused on the accumulation of profits, leading to major conflicts, and cyclical crises.

So is “inclusive capitalism” an oxymoron? Or is it the response to Marx’s dire prediction that will lead to capitalism’s survival and regeneration—to make it truly the engine for shared prosperity?
If so, what would the attributes of inclusive capitalism be? Trust, opportunity, rewards for all within a market economy—allowing everyone’s talents to flourish. Certainly, that is the vision.

Most recently, however, capitalism has been characterized by “excess”—in risk-taking, leverage, opacity, complexity, and compensation. It led to massive destruction of value. It has also been associated with high unemployment, rising social tensions, and growing political disillusion – all of this happening in the wake of the Great Recession.

One of the main casualties has been trust—in leaders, in institutions, in the free-market system itself. The most recent poll conducted by the Edelman Trust Barometer, for example, showed that less than a fifth of those surveyed believed that governments or business leaders would tell the truth on an important issue.

This is a wakeup call. Trust is the lifeblood of the modern business economy. Yet, in a world that is more networked than ever, trust is harder to earn and easier to lose. Or as the Belgians say, “la confiance part à cheval et revient à pied” (“confidence leaves on a horse and comes back on foot”).
So the big question is: how can we restore and sustain trust?

First and foremost, by making sure that growth is more inclusive and that the rules of the game lead to a level playing field—favoring the many, not just the few; prizing broad participation over narrow patronage.

By making capitalism more inclusive, we make capitalism more effective, and possibly more sustainable. But if inclusive capitalism is not an oxymoron, it is not intuitive either, and it is more of a constant quest than a definitive destination.

I will talk about two dimensions of this quest—more inclusion in economic growth, and more integrity in the financial system.

Inclusion in economic growth
Let me begin with economic inclusion. One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy.

The facts are familiar. Since 1980, the richest 1 percent increased their share of income in 24 out of 26 countries for which we have data.

In the US, the share of income taken home by the top one percent more than doubled since the 1980s, returning to where it was on the eve of the Great Depression. In the UK, France, and Germany, the share of private capital in national income is now back to levels last seen almost a century ago.

The 85 richest people in the world, who could fit into a single London double-decker, control as much wealth as the poorest half of the global population– that is 3.5 billion people.

With facts like these, it is no wonder that rising inequality has risen to the top of the agenda—not only among groups normally focused on social justice, but also increasingly among politicians, central bankers, and business leaders.

Many would argue, however, that we should ultimately care about equality of opportunity, not equality of outcome. The problem is that opportunities are not equal. Money will always buy better-quality education and health care, for example. But due to current levels of inequality, too many people in too many countries have only the most basic access to these services, if at all. The evidence also shows that social mobility is more stunted in less equal societies.

Fundamentally, excessive inequality makes capitalism less inclusive. It hinders people from participating fully and developing their potential.

Disparity also brings division. The principles of solidarity and reciprocity that bind societies together are more likely to erode in excessively unequal societies. History also teaches us that democracy begins to fray at the edges once political battles separate the haves against the have-nots.

A greater concentration of wealth could—if unchecked—even undermine the principles of meritocracy and democracy. It could undermine the principle of equal rights proclaimed in the 1948 Universal Declaration of Human Rights.

Pope Francis recently put this in stark terms when he called increasing inequality “the root of social evil”.


woodensplinter said...

Pity she wasn't wearing a red dress.

CNu said...

That's just nasty...,

woodensplinter said...

Stated colloquially "you'd hit"

CNu said...

lol, thin, rich, pampered, french old as dirt - wtf I want with granny, high-priestess of Ba'al and Mammon's withered-up little old cakes?, stop projecting!!!

makheru bradley said...

Attorney General Robert Kennedy approved the wiretaps on MLK, which he had resisted until Hoover told him that he knew about JFK's affair with Ellen Rometsch.

They are calling MLK a colossal fraud, evil and vicious. Who was more fraudulent than the powerful J. Edgar Hoover, clearly one of the most profoundly depraved and malevolent people in history.

Naive Tom said...

Holy crap a Pope who has read the Sermon on the Mount?

CNu said...

Christian praxis is the highest aspiration and hardest sell in the world. Disgust and all that follows therefrom is a comparative cakewalk and those high-living ladies in red in the college of cardinals figured that out a loooong time ago. Hustle-hard...,